Local Authority Financial Sustainability and the Section 114 Regime

Housing, Communities and Local Government Committee Closed Inquiry
Opened: 1 Dec 2020 Closed: 25 Oct 2021 Parliament page
This inquiry will consider the scale and depth of financial sustainability issues within local authorities with the potential to lead to the issuing of S114 notices, including the effect of commercial investments and the impact of Covid-19, and the role of central government in helping councils avoid this outcome. Read more
9 Recommendations
11 Conclusions
1 Report
3 Oral sessions
3 Events
Activity timeline 5 events
21 Oct
2021
Report published
19 Jul
2021
Report published
25 Mar
2021
Oral evidence
22 Feb
2021
Oral evidence
8 Feb
2021
Oral evidence
Oral evidence sessions 3 sessions
25 Mar 2021
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Oral evidence
Chris Buss · Croydon Council Cllr Hamida Ali · Croydon Council Katherine Kerswell · Croydon Council Sarah Ironmonger · Grant Thornton
22 Feb 2021
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Oral evidence
Alex Skinner · Department for Levelling Up, Housing and Communities Luke Hall · Ministry of Housing, Communities and Local Government
8 Feb 2021
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Oral evidence
Cllr Richard Watts · Local Government Association (LGA) Rob Whiteman · CIPFA
Title HC No. Published Items Response
Second Report - Local authority financial sustainability and the… HC 33 19 Jul 2021 20 Responded
Recommendations & Conclusions
5 results
Clear
1 Recommendation Accepted
Second Report - Local authority fi…
The failure to properly fund children’s and adult social care, especially adult social care, is...
The failure to properly fund children’s and adult social care, especially adult social care, is the single biggest threat facing local government financial resilience. Given that the cost of providing social care consumes between 60% and 70% of the budgets … Read more
Government Response
The government has committed to investing an additional £5.4 billion over three years, following a 7 September 2021 announcement, to begin a comprehensive programme of reform for adult social care. Further details will be published in a White Paper later this year.
Ministry of Housing, Communities and Local Government
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12 Conclusion Accepted
Second Report - Local authority fi…
The Government deserves credit for having responded to an unprecedented crisis with significant emergency funding...
The Government deserves credit for having responded to an unprecedented crisis with significant emergency funding that, from a national perspective, broadly covers all the additional financial pressures consequent on the pandemic and lockdowns in 2021–22. The effects of the pandemic … Read more
Government Response
The government highlighted over £12 billion in funding already committed to councils, stating that allocations are based on need and that it continues to monitor local authority finances to inform the ongoing Spending Review and support individual authorities.
Ministry of Housing, Communities and Local Government
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14 Conclusion Accepted
Second Report - Local authority fi…
Commercial investment appears to pose no clear threat to local government financial resilience overall, and...
Commercial investment appears to pose no clear threat to local government financial resilience overall, and where it has contributed to financial instability, the councils concerned must bear ultimate responsibility. We also welcome the Government’s reforms to the PWLB’s lending terms, … Read more
Government Response
The government is strengthening the capital system and Prudential Framework by working with CIPFA to amend statutory codes, with planned implementation from April 2022, and by tightening legislation on Minimum Revenue Provision duty and borrowing capping powers.
Ministry of Housing, Communities and Local Government
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18 Recommendation Accepted
Second Report - Local authority fi…
We recommend the Government remove the ability of local authorities to choose their own auditors.
We recommend the Government remove the ability of local authorities to choose their own auditors. The risk is that auditors will be reluctant to flag up potential problems for fear of losing their contract. The Government should consider who will … Read more
Government Response
The government has confirmed its intention to establish the Audit, Reporting and Governance Authority (ARGA) as the new system leader for local audit and considers the Public Sector Auditor Appointments Ltd (PSAA) as the best placed appointing body. It has also undertaken a consultation on the local audit framework and will keep arrangements under review.
Ministry of Housing, Communities and Local Government
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20 Recommendation Accepted
Second Report - Local authority fi…
We recommend that the Government consider changing the section 114 regime to provide Chief Finance...
We recommend that the Government consider changing the section 114 regime to provide Chief Finance Officers with intermediary measures that can be applied at a much earlier stage to highlight concerns before a council’s finances deteriorate so far as to … Read more
Government Response
The government defends the existing Section 114 regime as effective and states that a wider system of checks and balances, including statutory reporting duties for Section 151 Officers and powers for external auditors, already provides mechanisms to highlight financial concerns.
Ministry of Housing, Communities and Local Government
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Government Response AI assessment · 20 of 9 classified
Accepted 5
Accepted in Part 4
Acknowledged 3
Deferred 3
Rejected 5
Total 9 recs + 11 conclusions